Did you know that as an employer, you could be liable to pay monetary fines or in a worst-case scenario – face imprisonment – if you were to fall short in your income tax obligation?

The Inland Revenue Board (IRB) of Malaysia will audit employers on a regular basis to ensure that they are complying with their income tax reporting obligations. As mentioned above, penalties may arise out of failure to do so. To mitigate that risk, employers must ensure human resources personnel are kept up to date on new tax developments to adequately uphold the employer’s tax obligations.

Let’s have a look at the possible penalties that could be imposed.

Pursuant to section (s) 120(1) of the Income Tax Act (ITA) 1967, when employers fail to fulfill their obligations, they “shall be guilty of an offence and shall, on conviction, be liable to a fine of not less than two hundred ringgit and not more than twenty thousand ringgit or to imprisonment for a term not exceeding six months or to both”. 

In simpler terms, you can be:

- fined up to RM20,000; 

- imprisoned for up to 6 months; or 

- have both penalties imposed simultaneously.